How Obama’s Budget Takes the “Middle Out” Down

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President Obama says fixing income inequality stands as his “highest priority.” His budget plan suggests otherwise, unless Obama plans to do so with diminished discretionary federal spending. That’s the part of the budget that pays for medical research, schooling, consumer safety, food stamps, roadways, and programs meant to help lift people out of poverty.

Over the next 10 years, the 2014 Obama budget blueprint would fund these programs at an average of 3 percent of gross domestic product.

According to White House budget tables, that’s a full percentage point cut from the previous decade—when many of these economic equality problems were festering. In other words, the president plans to solve the dilemma by spending less than his predecessors.

IN TRAINING FOR THE BIG FIGHTWith Congress at home on its August recess, the posturing has already begun on a budget fight that will erupt next month. Obama and Congress must agree to a 2014 budget by Oct. 1, or survive on a series of short-term continuing resolutions.

A group of 13 Republican senators led by Texas’ Ted Cruz are threatening to shut down the government unless the president agrees to defund Obamacare. They must also lift the $16.7 trillion debt ceiling, or throw the nation into a historic default.

The public feuding can make it tough to sort out what Democrats and Republicans are really dueling over. So The Fiscal Times re-examined the competing budget plans only to find a president with lots of talk for the middle class and Republicans who have sabotaged themselves with spending cuts.

Here’s what Obama has going for him in the debate—he still plans to devote more funding to discretionary programs than House Republicans would. The president claims that GOP lawmakers would rather chase a dead-end IRS controversy than work with him on the economy.

“Unfortunately, for the last year or so, we’ve had an endless parade of distractions and political posturing and phony scandals that shift focus away from what do we need to do to shore up middle-class families and create ladders of opportunity for folks to get into the middle class,” Obama said Tuesday in Phoenix. “And as Washington heads towards another budget debate, the stakes could not be higher.”

Obama does plan to spend $50 billion on new infrastructure projects, while expanding the number of innovation hubs that could develop tech jobs.

But the president essentially tied his hands with the 2011 Budget Control Act—the agreement that previously raised the debt ceiling and led to more than $2 trillion in deficit savings over 10 years.

It not only set in motion roughly $1 trillion of sequestration cuts, but prioritized short-term deficit reduction over job creation. What made the deficit reduction so myopic? It largely hinged on discretionary programs instead of entitlement reforms that are projected to drive the national debt upward over the next several decades.

“Obama’s most recent budget proposal doesn’t match his rhetoric on public investment,” said Andrew Fieldhouse, a former congressional staffer who now holds a fellowship with the Century Foundation. http://www.tcf.org/ “The administration shot itself in the foot and set the middle class back by chasing the ever-elusive ‘balanced’ grand bargain that the Tea Party-infused Republican Party will never agree to. Budget deficits were never the key economic challenge to address in the present economic context - that would have been the jobs crisis.”

House Republicans also face turmoil from their commitment to discretionary spending cuts. The Budget Control Act capped nondefense discretionary spending at $531 billion.

Under the blueprint from Rep. Paul Ryan (R-WI) that House Republicans approved earlier this year, almost $100 billion more would be lopped off that total, according to the Center on Budget and Policy Priorities, a progressive think tank. Obama’s plan would spend $624 billion.

The GOP move was seen by many as an unrealistic approach to a budget that really is troubled by growing Medicare expenditures.

“Obviously, at a broad level, it would make sense to ease up on discretionary spending cuts and instead address the imbalance between entitlement spending and revenue,” said Alan Viard, a resident scholar at the conservative American Enterprise Institute. “That’s where the real, long-term problem lies.”

The GOP plan does turn Medicaid—which provides medical care for low-income Americans and those with disabilities—into a grant program to save money. But for the politically hot Medicare—and the seniors who benefit from its health coverage—the Republicans held off on any drastic reforms until 2023.

The obstacle is that the GOP cannot abide by discretionary cuts as steep as they approved in Ryan’s blueprint. After passing a budget plan, each chamber of Congress then approves a dozen appropriations bills to fund the government.

House Republican leaders yanked from the floor last week a $44.1 billion measure to pay for the departments of Transportation and Housing and Urban Development. Nicknamed THUD, the bill slashed existing spending levels by $7.7 billion and Community Block Development Grants in half.

But the measure as it stood lacked enough congressional votes to pass on its own without Democratic support. Some lawmakers saw the reductions as too dramatic. The conservative Heritage Foundation advocated even deeper cuts, including privatization of Amtrak ($950 million) and pulling $12 billion out of the Highway Trust Fund.

"I believe that the House has made its choice: sequestration -- and its unrealistic and ill-conceived discretionary cuts -- must be brought to an end," a frustrated House Appropriations Committee Chairman Hal Rogers (R-KY) wrote in a letter to leadership.

House Majority Leader Eric Cantor (R-VA) tried to spin the defeat on Fox News Sunday, saying, “What we need to have happen is leadership on the part of this president and White House to come to the table finally and say, we're going to fix the underlying problem that's driving our deficit. We know that is the entitlement programs and unfunded liability that they are leaving on this generation and the next.”

Obama has found savings in prescription drug benefits, but he has refused to go along with a GOP plan that would transform Medicare for Americans younger than 55 into a government voucher program for insurance.

But Republicans seem unable to tend to the chaos caused by their cuts to discretionary spending. Their plan also led to a Farm Bill that excluded funding for food stamps—which Cantor has said should be reduced and attached to work requirements.

This has allowed Obama to barnstorm the country touting spending reductions under the guise of new programs to rebuild the middle class. And while the airwaves might be full of Republicans such as Cruz boasting about the need to stop Obamacare, others such as Rogers must assure his constituents that they will not lose their food stamps.

Almost 15,000 residents of Pulaski County, KY in Rogers’ district receive food stamps under the Supplemental Nutrition Assistance Program.

“If the food stamp bill were to get bogged down, food stamp availability will continue,” the appropriations chairman told the local Commonwealth Journal. “I have an appropriations bill ready to go to the floor that will fund the food stamp program as it is.”